A business associate of law-and-order Rep. Michael Grimm is a convicted felon who served time for his role in a $2 million scam, the Daily News has learned.

Carlos Luquis identified himself on his business card as a "director" of Austin Refuel, a Texas-based company Grimm has co-owned since 2008.

Grimm, a Staten Island Republican, and Luquis share a law enforcement background, having worked for years as FBI agents, including a stint together in the New York office.

During his campaign for office last year, Grimm emphasized his exploits in the FBI and presented himself as a big supporter of law enforcement.

Luquis left the FBI in 2003 and became head of security for the Electric Reliability Council of Texas, a company that manages the flow of electricity in the Lone Star State.

Eighteen months later, Luquis and five others were indicted on charges of setting up bogus companies to bill ERCOT $2 million for jobs that were never done.

Luquis was convicted of two of six counts in 2006.

At his sentencing, a lead agent in the Sept. 11 terror attacks investigation, Mary Galligan, testified Luquis exaggerated his involvement in the 9/11 probe on his resume. Luquis, she told the court, "exploited the national tragedy for personal gain."

Sentenced to 12 years, Luquis served less than two and was released in May 2008, three months before Grimm's company was incorporated. Luquis still owes $200,000 in restitution, records show.

Several business owners in Texas who have dealt with Austin Refuel identified Luquis as the point man in their dealings.

Sally Jo Hahn, an alternative fuels consultant, says she was contacted by Luquis and Grimm in the fall of 2008 for assistance in getting their operation off the ground.

"[Luquis] was in charge. He was doing all the leg work. He was going to all the consultants," Hahn said, noting Luquis spelled his name "Lukiz" in his dealings with her.

Another person involved in the alternative energy business who had dealings with Austin Refuel said Luquis "was the one that put the business plan together."

Grimm told The News Luquis "is not, nor has he ever been, a partner in Austin Refuel," and has never "held any ownership or any legal interest in Austin Refuel."

In an email to the News, he said Luquis was hired as an independent contractor "by a mutual friend" after he got out of prison.

"The business plan was already finished before [Luquis] was released," Grimm wrote. "I contracted Carlos because he was a friend that needed a hand in getting back on his feet and I am not a fair-weather friend: It's called loyalty and for a man that served this country honorably for approx 16 years, he earned a second chance .... Later, at some point, Austin Refuel contracted Carlos to handle the logistical end of the business and [he] assumed the role of director of logistics, based on his experience in the Navy."

Grimm said he did not know why Luquis used the name "Lukiz" in some dealings, but "I made his record known to those that needed or had a right to know, including my customers that he ultimately interacted with."

Grimm said the current CEO is Joshua Rosenbaum, a Bronx real estate lawyer and Grimm campaign contributor. Grimm was CEO of Austin Refuel until his election to Congress in November. His financial disclosure forms say he holds a 28% stake in the company.